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Credit rationing and crowding out during the industrial revolution: evidence from Hoare's Bank, 1702-1862

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  • Temin, Peter
  • Voth, Hans-Joachim

Abstract

Crowding-out during the British Industrial Revolution has long been one of the leading explanations for slow growth during the Industrial Revolution, but little empirical evidence exists to support it. We argue that examinations of interest rates are fundamentally misguided, and that the eighteenth- and early nineteenth-century private loan market balanced through quantity rationing. Using a unique set of observations on lending volume at a London goldsmith bank, Hoare's, we document the impact of wartime financing on private credit markets. We conclude that there is considerable evidence that government borrowing, especially during wartime, crowded out private credit.

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Bibliographic Info

Article provided by Elsevier in its journal Explorations in Economic History.

Volume (Year): 42 (2005)
Issue (Month): 3 (July)
Pages: 325-348

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Handle: RePEc:eee:exehis:v:42:y:2005:i:3:p:325-348

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Web page: http://www.elsevier.com/locate/inca/622830

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Cited by:
  1. David R Stead, . "Fixed Rent Contracts in English Agriculture, 1750-1850: A Conjecture," Discussion Papers 05/01, Department of Economics, University of York.
  2. Kiril Danailov Kossev, 2008. "The Banking Sector and the Great Depression in Bulgaria, 1924 - 1938: Interlocking and Financial Sector Profitability," Working Papers 76, Bank of Greece.
  3. Efraim Benmelech & Tobias J. Moskowitz, 2010. "The Political Economy of Financial Regulation: Evidence from U.S. State Usury Laws in the 19th Century," Journal of Finance, American Finance Association, vol. 65(3), pages 1029-1073, 06.
  4. Mauricio Drelichman & Hans-Joachim Voth, 2008. "Debt Sustainability in Historical Perspective: The Role of Fiscal Repression," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 657-667, 04-05.
  5. Maria Alejandra Irigoin & Regina Grafe, 2012. "Bounded Leviathan: or why North and Weingast are only right on the right half," Economic History Working Papers 44492, London School of Economics and Political Science, Department of Economic History.

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